There are a few key differences and similarities between Arrived rental property investments and public REITs focused on rental homes.
Key Differences:
Ability to Select Individual Properties and Investment Strategies: Arrived lets investors choose specific properties or invest in diversified funds, while a public REIT pools many assets into one security.
Volatility : Public REIT shares trade daily, so their prices can move with interest rates and broader market sentiment, sometimes independently of changes in property values. Private real estate is typically valued less often, using appraisals. One study by TIAA found that from 2000 to 2020, an index of listed REITs had annualized volatility of 21.6%, compared with 8.4% for an appraisal-based index of private real estate funds.¹ Part of that difference reflects how each is measured: appraisals are periodic and tend to smooth out price changes. Lower reported volatility does not mean lower risk, and these figures do not reflect Arrived's own investments.
Income: Both Arrived investments and public REITs may pay dividends, and those dividends can vary over time based on investment performance. Yields differ by property, fund, and market conditions.
Liquidity: Public REIT shares can generally be bought and sold on a stock exchange during market hours. Arrived investments should generally be viewed as longer-term investments. Investors may have the option to sell individual property shares on the secondary market, and certain funds offer a quarterly redemption program subject to holding periods, fees, and limits. Neither guarantees a sale or redemption. See the offering circular for each investment's terms.
Tax structure: Arrived's single-family residential property offerings and its funds are structured to be taxed as REITs (vacation rental offerings are not). REITs generally avoid corporate-level income tax by distributing most of their taxable income to investors. Depreciation at the REIT level can reduce the portion of distributions treated as taxable ordinary income, and qualified REIT dividends may be eligible for the Section 199A deduction. Like other REIT dividends, distributions generally do not qualify for the lower tax rates that apply to some other dividends. Tax treatment depends on your individual situation, so consult a tax advisor.
Similarities: Both are subject to SEC disclosure requirements: public REITs file reports as registered companies, and Arrived offerings are conducted under Regulation A, with offering circulars and ongoing reports filed with the SEC. SEC qualification does not mean the SEC has approved or endorsed an investment. Both give investors exposure to real estate without managing properties directly.
For more details on the similarities and differences, check out this blog post.
Disclaimer
The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. The views reflected in the commentary are subject to change at any time without notice. View Arrived’s disclaimers.
Source:
¹TIAA, “Private real estate: Opportunity for income and diversification” (05/21), Exhibit 4 (Jan 1, 2000–Dec 31, 2020): https://www.tiaa.org/public/pdf/p/private-real-estate-whitepaper.pdf